Yo, Pit Crazies,
Ah, Led Zeppelin…
When the levee breaks / I’ll have no place to stay.
Oil broke its rally, so the key inflation driver is going into remission The FOMC was very hawkish and committed to the rate hikes
The big question is where does the market go? I don’t think market leaders will be able to keep their higher multiples going forward.
The potential range for the SPX is shrinking in the short term and ew reasons, if any, to be go-go bullish.
The Standard and Poor’s 500 stock index (Ticker: SPX) bounced off of 3700. Twice.
Maybe when the VIX levee breaks, juice will have nowhere to go..
30 Day Realized Volatility in the SPX Is breaking
We just had a historic run of SPX volatility staying above 30 for an extended period of time. It ended this week.
After nearly two months of crazy market volatility, 10-day volatility in SPX is down to 21%
In order for VIX to drop, SPX has to get to more historical realized volatility levels. That number is in the teens statistically.
The 1-2-3 punch of inflation, Putin and rates sent things into a tailspin for a while but stocks have accepted the status quo.
How do I know? We’re not selling off any lower. That does not mean we can’t.
SPX chart with 30-day volatility.
One of my sharper students eyeballed the ProShares Ultra Short Term VIX futures ETF (Ticker: UVXY) July 8 13.5 puts for .15 on Wednesday. I bought some for .19. I think they are an easy double and the path for VIX is headed for 20.
When the levee breaks..
The Rundown
SPYMaster
I closed my SPY July 15 390/400 call spread for a 20% gain … some students did better. The better news is that puts me in the VIX July 20 26 put for .15 and it is trading for 1.25. I have a good shot at a 80% return on this trade at 20% VIX.
Pro Chat Room
LRD is bringing the ideas on the UVXY puts. Fed talked tough, but VIX was down.
To Your Trading Success,
AG